Like many people, I tend to worry about things. As I get closer to bringing the working-for-a-living phase of my life to an end and the time at which I will no longer see my remuneration hitting the bank account at the beginning of each month, retirement related concerns have loomed large. The following is my review of the things which could cause my retirement to fail (either by forcing one or both of us to keep working or to take a material cut in our standard of living):
1. Illness, disability and infirmity: these things can happen to anyone. If I live long enough they probably will. The main safeguards here are (i) the financial over engineering built in to our finances (ii) we will have medical insurance for a time after I retire (shifting to a plan offered by my wife's employer if needed) (iii) Hong Kong's public health system is reasonably good (iv) hiring a full time domestic helper with experience in looking after invalids is both affordable and realistic and (v) the sorts of conditions which will result in increased spending on medical and support services will most likely result in reductions in spending elsewhere;
2. Children: we have two relatively young children and anticipate supporting them through to at least their mid-twenties. This is in the budget. They could end up costing us more than expected, especially if they have difficulties finding a good job after they complete their formal education. Our safeguards in this respect are (i) teaching them the value of good money management - being prepared to say "no" as and when appropriate (ii) we have not made any provision for the cost of our children to fall away. In effect, we have proceeded on the basis that we will have something of a windfall when the eventually fall off the family payroll;
3. Divorce: a major issue for some. I have no concerns at all on this front;
4. Financial misfortune: I have probably spent more time thinking about our finances than is healthy. While there are obviously a number of things that can go wrong and there is no way to make our finances proof against all possible forms of adversity, we have concluded that the combination of investing in a variety of risk assets (mostly property and equities), reliance on cash flow to meet expenses, 20% gross up on anticipated expenses and a degree of self-discipline on our spending should see us through most economic cycles, moderate inflation, moderate deflation and market volatility. There is less that can be done about hyperinflation, natural disasters and social dislocation events but I do intend to add a little bit more physical gold to the portfolio. Although completely unnecessary from a financial perspective, I will have an additional six months of work next year and Mrs Traineeinvestor wishes to continue her part time job - in effect we will not need to begin touching our savings until some time in 2014;
5. Boredom: The thought of mentally dying of boredom is something that causes real concern. It was, in fact, Mrs Traineeinvestor's only reservation about my intention to retire early (although I do not consider 47 an early age to retire). I have my bucket list so I can have no excuses in this department.
Did I miss anything?
One of the best things to do to make your retirement successful is to plan ahead. You should start planning 10 to 20 years before you retire, but if you can plan earlier, then that would be even better. Forecast the possible obstacle that might hinder your retirement. After having listed those down, think of ways to overcome those obstacles before your target date of retirement. Do not forget to settle all your financial responsibilities early on. Retirement is about slowing down your life, so make sure you deal with everything while you still have the energy and the youthfulness to do so.
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